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5 For Producer Use Only IRD: The Bad News Is... 1.No step-up in basis at death 2.Beneficiary pays income tax at owner’s death –Taxes are calculated at Beneficiary’s tax rate 3.Deceased IRA owner must include the entire IRA value in his / her estate for estate taxes –Even though the $$ pass directly to the designated beneficiary! This is what’s known as the “Double-Tax”

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6 For Producer Use Only IRD: The Good News Is... You can overcome these problems The IRS gives you tools to do it! 1.Stretch the inheritance to spread the taxes over many years and continue tax deferral 2.Consider charitable beneficiaries 3.NUA – more about this in a few minutes! 4.Beneficiary receives an income tax deduction for estate taxes paid by owner

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18 For Producer Use Only NUA – What is it?  It’s the appreciation on the “employer stock” in your 401(k)  Upon separation from service, you can distribute your employer stock (in-kind distribution) from your 401(k)  your brokerage account.  When you distribute your NUA, you only pay income tax on the value of the stock when it was originally purchased in your 401(k)  If you then hold the NUA stock for more than one year, you receive Long-Term Capital Gains tax treatment on any appreciation in the shares you sell  You can still roll the balance of your 401(k) into a Rollover IRA

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19 For Producer Use Only NUA – Benefits  Long-term capital gains tax treatment –All gains in excess of “basis” are taxed as Long- Term Capital Gains –There ARE Step-Up-In-Basis opportunities with NUA!  There is no “RMD” on NUA stock –No requirement to sell it after age 70½ –Defer the growth for the rest of your life! –Pass it on!

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21 For Producer Use Only NUA – 3 Components Any appreciation on your NUA stock that occurs after you’ve removed it from your 401(k) DOES get a step-up in basis at your death NUA appreciation that occurred while the company stock was in your 401(k) does NOT get a step-up in basis at your death, but is taxed at long-term capital gains tax rates when sold The original stock price becomes “cost basis” when withdrawn from the 401(k) and taxed

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23 For Producer Use Only NUA – Caveats  Be careful about selling the employer stock in your 401(k) and investing it in something else –Even if you later “buy back” some employer stock, the newly purchased stock will have a new “basis” Functionally eliminates the value of the NUA distribution –Continually remind your clients of the importance of NUA: 1.Before they roll their 401(k) into an IRA; and 2.Before they sell employer stock inside of their 401(k)

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24 For Producer Use Only Story Selling And IRA Wealth Transfer Strategies

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26 For Producer Use Only Cross out the one you would least like to get your money when you’re done with it. X L.O. CG Your money can go to three places when you’re done with it: 3 Circles

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27 For Producer Use Only Client Questions & Value Proposition Two questions: 1.Mr. & Mrs. Jones, if things go the way you have planned, what’s going to happen to your IRA? 2.Why don’t you give it to them right now? Three-point value proposition: 1.We’ll keep your IRA in your Care, Custody and Control; 2.Potentially double, triple or quadruple the value to your beneficiaries; and 3.Take no additional investment risk in your portfolio

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28 For Producer Use Only 2 IRA Wealth Transfer Strategies

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29 For Producer Use Only Typical IRA Transfer IRA Owner(s) Children Grandchildren